Yesterday, positive US economic data fueled a significant increase in risk sentiment, causing both the US dollar and US Treasury yields to retreat from recent highs. The three major US stock indices opened higher and continued to rise throughout the day, with the S&P 500 index recording its largest single-day gain since June (+1.1%), driven by technology and real estate stocks. As a result, BTC also experienced a price increase of around +1.7% and closed at 26,473.53. According to data from Coin Metrics, the recent Pearson correlation coefficient between BTC and the S&P 500 has been steadily rising and has reached a level close to 0.5.
The increase in price has led to an increase in realized volatility, causing IV to also rise. In this scenario, BTC has experienced a relatively uniform increase of around 1% in volatility across the board. However, ETH has shown a different pattern, with a more significant increase in front-end volatility compared to the back-end, exacerbating the degree of inversion in the IV curve during this period.
From a trading perspective, it is evident that since the opening of the US stock market yesterday, the market has refocused on the upside potential of risk assets, including crypto options strategies. The Put/Call ratio of options trading volume has rapidly declined, reaching its lowest point in the past week. In the various contracts expiring in September, BTC is dominated by a significant number of bullish spread strategies, while ETH stands out with a more balanced view and strategy expression.
Furthermore, we have once again observed contrarian trading in BTC after a rebound in long-term implied volatility. There have been a significant number of Short Strangle strategies traded in the contracts expiring on 29th September 2023, 29th December 2023, and 29th March 2024. The reason behind this can be attributed to the fact that although the correlation between BTC and the S&P 500 has significantly increased in terms of price recently, there hasn't been a new story in crypto space that can stimulate implied volatility. The VIX of the S&P 500 remains in a downward trend.
